The regulatory proposals concerning the introduction of transparency in relation to the marketing and selling of life assurance products have been developed following intensive and extended consultations with all of the interested parties. The rationale for these regulations is the perceived need to rectify the failure of the insurance market to provide adequate information to the consumer in the marketing of life assurance products and to generate competition among suppliers. It is clear to me that adequate information both at point of sale and on an ongoing basis is not being provided to enable consumers to make rational and considered choices in relation to the investment of their savings. The recent annual report published by the Insurance Ombudsman indicates that the majority of complaints from policyholders continues to emanate from the life assurance-investment areas. Our objective is to end over-complication, mis-selling, confusion and sharp practice in the marketing and sale of insurance products. In particular, we want to ensure that information in relation to all charges and commission payments is provided as of right to the consumer. In pursuit of these aims, we intend to introduce a comprehensive disclosure package and to avoid piecemeal transparency measures which may lack credibility in the long-term.
Both myself and our officials have already met with the trade interests and industry representatives to discuss outstanding matters of concern, specifically in relation to non-investment products and the issue of equivalent disclosure between the various insurance providers. I am satisfied following these consultations that the thrust of the draft regulations and the supporting actuarial guidance notes will ensure a level playing field in disclosure as between the different distribution channels. In relation to the illustrative table in the draft regulations, two quite distinct aspects of deductions from premiums are being disclosed. Part 1 of the table analyses what the customer is being charged for the product; part 2 states what the insurance intermediary or, on an equivalent basis, the salesperson receives as a result of the sale. Part 1 deals with the total deductions, including specific life company expenses and charges, whereas part 2 discloses actual sales remuneration/commission payments at point of sale as well as assisting consumers in identifying possible product or provider bias. The equivalence element is achieved by looking beyond basic salary paid in the case of a salesperson's salary to include an element which represents the cost of the benefits, assistance and services available which the independent broker would have to meet out of gross commission. The main elements of commission equivalent have been identified in the actuarial guidance notes.
In framing the regulations I was acutely conscious of the need to avoid creating disclosure loopholes in the transparency regime which could lead to manipulation of the system and create competitive distortions. I also believe that the individual consumer is entitled to the fullest information available whether he/she purchases an investment product or a non-investment or pure protection product. Therefore, unless there were demonstrably greater public interest reasons why they should be excluded, I do not think that we would be justified in excluding pure protection products from the scope of the regulations.
